Morning Report: 22 December 2017

GBP Yesterday’s session was uninspiring for many major currencies and sterling was not an exception, closing unchanged against the dollar and slightly higher against the euro. The sacking of Prime Minister Theresa May’s second-in-command Damian Green from the Government seems to have passed without incident, and yesterday’s sole major release was government borrowing, which was lower than expected in November. This morning’s data will consist of the 09:30 GMT release of the Current Account, updated Gross Domestic Product Growth in the third quarter, and indices for Business Investment and Services.

EUR The euro saw a big drop overnight as the Spanish province of Catalonia narrowly voted for a majority of pro-independence parties in local elections. It is notable that the 70 seats won by the three separatist parties represented a fall in the share of pro-separatist parties since the last elections in 2015, though above the 68 seat threshold required for a legislative majority. Despite this, the party with the most amount of individual votes were the pro-Unionist Citizens party, which left the situation unclear as to who holds the right to form a government. As a result, weeks of coalition talks and constitutional tension are now likely. This morning’s data has included a strong print for French Consumer Spending, which rebounded after a contraction in October.

USD The US dollar already started its Christmas hibernation yesterday and largely refused to move against the other major currencies. The US budget saw another episode of kicking the can down the road after the Senate approved a budget extension that should cover the government expenditures for another three weeks, and no confirmation of when the bill will be signed into law was given. This postpones some difficult fiscal and policy into the new year. The final reading of the GDP was slightly below the mark at 3.2% for the third quarter, which is still impressive. This afternoon Core Durable Goods orders from November will be published at 13:30 GMT, together with the Fed’s favourite inflation measurement; the core Personal Consumption Expenditures Price Index

CAD The loonie had a smashing day across the board yesterday after both Retail Sales and Consumer Price Index figures from November beat expectations. CPI increased 0.3% on the month and the total value of Retail Sales expanded by 0.8%. The Bank of Canada remains cautious for now, possibly awaiting the next round of NAFTA negotiations that will take place in Montreal in January. Strong releases like this do however add to the pressure for the BoC to take action sooner rather than later. Today at 13:30 GMT we have Gross Domestic Product data for October, another top tier release.

UK news

Guardian: ‘Things aren’t easy between us’: Boris Johnson meets Russian counterpart in Moscow. Boris Johnson has begun talks in Moscow with the Russian foreign minister Sergei Lavrov as he makes the visit to the country by a British foreign secretary for five years. In public comments before the talks, Lavrov chided Johnson for his public criticism of Russia and said the miserable state of bilateral relations was London’s fault.

Reuters: Critics accuse UK government of not taking Brexit preparations seriously enough. Pro-European campaigners accused ministers of failing to take preparations for Brexit seriously enough on Thursday, after a committee of lawmakers published the government’s sector-by-sector analysis on the impact of leaving the European Union.

Telegraph: British passports will return to ‘iconic’ blue cover after Brexit, it is confirmed. British passports will return to having blue covers after Brexit, it has been confirmed. The new design, which will no longer include the European Union insignia, will replace the burgundy cover that has been a feature of the UK passport since the 1980s once Britain leaves the EU in 2019.